South Korea's financial watchdog is poised to announce early next month the results of its legal scrutiny into Lone Star Funds' eligibility as the biggest shareholder of Korea Exchange Bank (KEB), officials said Sunday.
Lone Star, a U.S.-based private buyout fund, bought a controlling 51 percent stake in KEB, the fifth-largest lender in South Korea, for 1.4 trillion won (US$1.26 billion) in 2003. In November last year, it struck a deal with Hana Financial Group Inc. to sell the stake for 4.69 trillion won.
There has been controversy over Lone Star's eligibility since the head of the fund's local unit was found to have purchased KEB's credit card division by manipulating its share prices.
"We have been conducting a legal examination of the case and will be able to unveil the results in early April," said an official at the Financial Supervisory Service (FSS), the country's financial regulator.
The FSS plans to wrap up the case as soon as possible after receiving opinions from legal experts, the official said.
In mid-March, the Financial Services Commission (FSC), the FSS's decision maker, concluded Lone Star is qualified to hold a major stake in a local bank because it is a financial player, but said it needs more time to study legal implications of a court ruling.
On March 10, the Supreme Court convicted Yoo Hoi-won,the head of Lone Star's local unit, for issuing a false disclosure to manipulate stock prices before his company bought the credit card unit of KEB in 2003.
Yoo unveiled the capital write-down plan to buy the card firm at a below-market price, the nation's top court said,overturning a lower court's decision. Lone Star later integrated
the card unit into KEB, which the buyout fund had previously purchased.
The court ruling renewed debate over Lone Star's allegedly illegal acquisition of KEB and pressed the FSC to refrain from delivering the final green light for Hana Financial's takeover of
KEB.
Market watchers said Hana Financial will face no difficulty in obtaining regulatory approval for its KEB acquisition if the watchdog determines Lone Star is eligible as the lender's
largest shareholder.
Hana Financial, the fourth-largest financial holding company in South Korea, had originally planned to conclude the takeover of KEB by the end of March. The FSC also delayed its deliberation on the approval of Hana Financial's KEB takeover.